Monday, December 12, 2011

Digital giants closing in on local media

Next year will be the year that the big technology companies go after local publishing and broadcasting businesses more fiercely than ever before. Most local media companies have no idea what’s about to hit them – much less a plan to respond.

Google already has feet on the street from Portland to New York City to sell search advertising and directory listings to small and medium business (SMBs). It is only a matter of time until the company targets ever-smaller markets like Cincinnati. Oops, it looks like it already has. Sales to local SMBs are absolutely the last stronghold for newspapers and Yellow Pages. If Google (and others) move in effectively with low-cost, high-touch services, then local publishers – who long have enjoyed the mastery of their domains and the pricing power it afforded – will be in a world of hurt.

Amazon is well on the way to doing to local merchants and big-box stores what it already has done to bookshops. Not satisfied with introducing the Kindle Fire as a hand-held reading and shopping machine, the company has launched a new mobile app called Price Check that lets you scan a barcode at Best Buy (or any other place) to get a better buy from Amazon before you leave the store, thus skipping the checkout line and avoiding sales taxes in many jurisdictions. Main Street and Big Mall merchants are the primary buyers of local newspaper, radio and television advertising. If Amazon and other digital disruptors (like the nifty Decide.Com price-comparison service) seriously disenfranchise bricks-and-mortar retailers, then local media will suffer right with them. (See also such former major retail advertisers as: Circuit City, CompUSA, Mervyns, et. al.)

Microsoft this month grabbed a lead in the eventual disaggregation of local broadcast and cable TV audiences by adding a host of popular programming services, including Netflix and ESPN, to the Xbox network that reaches some 35 million households. Impressive as the new voice- and gesture-controlled Microsoft console is, the big kahuna – Apple – has yet to roar. Steve Jobs is reported to have said in his dying breath that he had cracked the code of delivering a great experience to the big screen in the living room. Given his iTrackRecord, it’s hard to bet against him, but Google, Sony, Amazon, Netflix and a host of others will. When someone gets Internet-powered TV right – and someone most assuredly will – then local broadcast and cable TV audiences will shatter – and their business models will follow. For an example of how this might play out, consider this: The terrestrial AM-FM radio audience is barely a third as large today as it was in 2000, according to Bridge Ratings, an independent analytics service.

With revenues expected to reach “only” $2 billion this year, Facebook hasn’t siphoned away many local advertising dollars. Yet. But the intoxicating "ME"-ness of its content is carving heavily into the audiences of all traditional media, with Alexa.Com reporting that the average visit to Facebook lasts 21 minutes while the average session at, say, a newspaper website runs 3.5 minutes. It is axiomatic that advertisers will follow audiences, especially since Facebook allows marketers to specify such things as the Zip Code, age, education, marital status, sexual orientation and other specific interests of the target consumer. As is the case with Google’s outrageously profitable AdWords system (which delivers a significant share of the $36 billion in ad revenues the company is likely to book this year), marketers can opt to pay only when someone clicks on a Facebook ad, creating not only superior efficiency but sophisticated analytics that trump “Mad Men”-style marketing with free, actionable and real-time metrics. Not a local media company in the land can compete with the breadth and granularity of the Facebook platform. But, it gets worse: It's only a matter of time until daughters and sons inherit the body shop or mattress business from their dads. Once they do, these next-gen business leaders will turn to Facebook – and not the local media – to find customers among their friends and the friends of their friends. By comparison, the high-priced advertising alternatives offered by most local media companies will be, well, mighty unfriendly.

This is the known territory that local media companies will face in 2012 and beyond. But, as the noted deep-thinker Donald Rumsfeld once said, there are unknowns to contend with, too.

The unknowns are game-changing innovations we can’t conceive. Depending on your generation, try to remember what the world was like before radio, VCRs, mobile phones, the Internet or iPads. These compelling breakthroughs blasted out of nowhere and into the mainstream, roiling everything in their path.

Now, imagine all those things happening at the same time. That’s what the world will look like until further notice. And most local media companies aren't ready.

5 Comments:

It's been said that "a rising tide lifts all boats" and that's more how I see Google's SMB website initiative. More small websites = more potential advertisers for the newspaper's digital offerings (and healthier, better adapted local businesses).

If newspapers, national OR local, can capitalize on the alternative revenues that can be generated by harnessing the power of sites such as Facebook, Twitter and other social media and user generated content sites (YouTube, forums, etc.) then I feel as though media companies that are nimble enough (granted, there are few) will 'rise with the tide' as Darla states. Also, harnessing these sites will allow media outlets to personalize their messages more and utilize their local relevance to attract consumers who will increasingly find value locally as the rest of their world continues to expand so rapidly.

"It is only a matter of time until the company targets ever-smaller markets like Cincinnati."Cincinnati is the largest city in Ohio and has a metro of over two million people. Are you serious when you call this place small? You need to travel some.

"It is axiomatic that advertisers will follow audiences.." If that were the case, there would be successful urinal advertising companies. If you truly understand Facebook - what it is AND what it isn't, you wouldn't be so quick to hand then the keys to the local SMB advertising castle.

About Me

Alan D. Mutter is perhaps the only CEO in Silicon Valley who knows how to set type one letter at a time.
Mutter began his career as a newspaper columnist and editor at the Chicago Daily News and later rose to City Editor of the Chicago Sun-Times. In 1984, he became No. 2 editor of the San Francisco Chronicle.
He left the newspaper business in 1988 to join InterMedia Partners, a start-up that became one of the largest cable-TV companies in the U.S.
Mutter was the COO of InterMedia when he moved to Silicon Valley in 1996 to join the first of the three start-up companies he led as CEO.
The companies he headed were a pioneering Internet service provider and two enterprise-software companies.
Mutter now is a consultant specializing in corporate initiatives and new media ventures involving journalism and technology. He ordinarily does not write about clients or subjects that will affect their interests. In the rare event he does, this will be fully disclosed.
Mutter also is on the adjunct faculty of the Graduate School of Journalism at the University of California at Berkeley.